Financial Advice Just for Women Might Seem Like a Great Idea

Here’s why it’s not.

The career of former Wall Street executive Sallie Krawcheck is an index people look to when attempting to gauge women’s progress—or lack thereof—in the finance world. Featured on the cover of Fortune as Wall Street’s “Last Honest Analyst” in 2002, Krawcheck ascended to multiple CEO and CFO titles at Citigroup before losing her job in the midst of the 2008 financial crisis. Alongside Morgan Stanley’s Zoe Cruz and Lehman Brothers’ Erin Callan, Krawcheck was just another high-level female bank executive kicked to the curb. (She found a new spot at Bank of America, only to experience the same fate again in 2011.)

Now Krawcheck is trying to return the favor. She wants to convince women to kick their Wall Street financial advisers to the curb. Her suggested replacement? Sallie Krawcheck.

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Last week, Krawcheck declared she had raised $10 million in funding to open up her own advisory service, which she is calling Ellevest. “It’s time to give women an investing experience built specifically for them,” she said in announcing the initiative. “Women say that their needs are not being met by Wall Street,” Krawcheck added in a follow-up blog post.

Female-focused financial advice might seem like a can’t-miss business proposition. When a group of academics led by Sendhil Mullainathan at Harvard University set out to study how brokers treated clients a few years back, they discovered all sorts of malfeasance: making unnecessary changes in portfolios, putting clients in high-expense funds when lower-cost ones were available, and more. Some bad broker behavior was significantly more likely to impact prospective female clients. Not only did the advisers surveyed ask women less detailed questions about their salaries, expected career paths, and hopes for future economic prospects than they did their male peers; advisers were also more likely to demand women turn their funds over to their care before they doled out the first word of advice. The paper’s authors suspected that many in the financial community considered women to be either “more docile or gullible” than men.

Not surprisingly, women’s complaints of less than respectful treatment by the financial services sector are a constant. Back in 1994, a Money magazine investigation found financial advisers spent less time with potential female clients than their male peers, with some requesting that they bring their husbands to the next meeting; men, meanwhile, were not asked to return with their wives. Fifteen years later, in 2009, the Boston Consulting Group found that more than two-thirds of women they surveyed complained about condescending treatment by financial professionals. Last year, Sylvia Ann Hewlett’s Center for Talent Innovation released its own report, where once again women dinged the financial industry for dismissive attitudes. “What women are yearning for is to be treated seriously, to be treated as professionals,” Hewlett told NPR about her research.

There is only so much a female-friendly space can do for a woman’s wallet.

Anecdotally, I can attest to these tendencies: Over my many years of reporting on personal finance, I’ve been asked numerous times if I understand how stocks work, and male financial-industry professionals have insisted on explaining the mechanisms of 401(k)s to me.

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Given these findings, you’d think that female-focused financial advisories would be a no-brainer, especially since women routinely send books like David Bach’s Smart Women Finish Rich and Suze Orman’s Women & Money straight to the best-seller lists. Yet banks and investment houses have debuted women’s investment programs to great fanfare, only to shut them down entirely a few years later—for example, Charles Schwab, which instead decided to concentrate on the financial literacy of all investors. When asked why, a Schwab spokesman replied, “Our approach is to treat each investor as an individual.” (Schwab is now a corporate sponsor of Ellevate.) More recently, Citibank’s Women & Co., which had been around since 2001, was quietly folded into the bank’s other social media and outreach efforts.

Female-focused start-ups have not fared much better. Harvard Business School drop-out Alexa von Tobel founded LearnVest in 2009 and received reams of positive press (“Helping women master their money,” headlined Crain’s New York Business). LearnVest looked like a success story, with a sale to Northwest Mutual earlier this year for a reported $250 million. But at the time of its sale, it had fewer than 10,000 customers willing to pay for its premier financial advice plan—a service that cost a grand total of $199 for setup plus $19.99 a month for continuing advice. Compare that to rival online advisory Wealthfront, founded in 2008, which announced just prior to Learnvest’s sale that it had reached $2 billion in client assets under management.

Krawcheck has been moving into the women’s professional and financial space for the past several years. In 2013, she bought 85 Broads, the women’s networking group; the following year, she renamed the group—which at the time had a reported 34,000 members—Ellevate. At the same time she announced a separate, branded mutual fund, the Pax Ellevate Global Women’s Index Fund, an expansion of an index fund already operated by fund provider Pax World Management.

Krawcheck isn’t saying how Ellevest will do money management differently beyond a few generalities. She says she’ll focus on the realities of women’s incomes and circumstances, recognizing how the gender pay gap, women’s longer life spans, and their caretaking responsibilities often lead to sporadic work histories. She promises to avoid advice that urges women to “invest in the stock market instead of buying shoes”—a not-so-subtle slap at LearnVest, which did just that.

And here is where it’s possible that Krawcheck—like everyone who has come before her—will run into problems. The issue is twofold. First, there is only so much a female-friendly space can do for a woman’s wallet. Many of women’s money woes do originate in unequal pay and lopsided caretaking burdens, and it’s nice to see that acknowledged—but financial advice can’t fit it. Only social change can do that.

The second roadblock is a marketing issue. Women are not monolithic, any more than men are. When seeking financial advice, individual women come with different finances, different needs, and different backgrounds. Simply hanging out a shingle and saying your business is here to serve women’s financial needs isn’t enough—any more than it would be enough to attract male clients.

Krawcheck might face somewhat better odds than her predecessors in this space. As the owner of a women’s networking organization, she already has a group of potential female customers who know and, presumably, trust her as a source of advice on how be a successful businesswoman. “She established a community; she then developed products and services for that community,” says April Rudin of The Rudin Group, a financial services marketing firm. “It gives her a much better chance.” Now Krawcheck just needs to convince those women to trust her with their money, and she’ll be all set.